Do Amazon’s Australian plans make sense?

Angus Kidman 6 December 2016 NEWS

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Our online spending habits might give the retail giant pause for thought.

Persistent rumours suggest that Amazon is planning a major expansion into Australia in 2017. Let's be clear: Amazon itself has said nothing. Its sole advance into Australia this year has been granting access to some of its Amazon Prime original video content to Australians; the Amazon Australia site still only sells Kindles and books to read on them. If you want to buy an Echo or make use of Prime Twitch for game streaming, you're out of luck.

Yet an endless stream of rumours from fund managers and others suggest that Amazon is planning to set up warehouses down under next year, expand the range of goods it sells to Australians and generally mess up the retail scene for everyone. Reports today that Amazon is setting up a store without checkouts in Seattle will doubtless add more fuel to that fire.

While we await some actual confirmation, I thought it would be instructive to look at how Australians currently spend money online. That's the market Amazon will be looking to disrupt if/when it arrives.

According to Roy Morgan, this is how much Australians spent online in the year to June 2016:

A few things to note. Firstly, the biggest category is travel, which Amazon isn't an active participant in. Entertainment is an equally broad category: while Amazon could certainly disrupt music and video, it's less likely to have an impact in ticket sales. That means that our two biggest online shopping categories are areas where Amazon isn't likely to compete much (if at all).

It's the next five categories - electronics, fashion, food, home and beauty - where Amazon is more likely to shake things up. There are major players in every one of those sectors, but very few are trying to dominate in all of them in Australia. The closest examples are eBay, Kogan (in terms of range) and Catch of the Day and OzSale (with a definite discount focus).

That said, the dominance of big retail brands in online spending is growing. "Just over a third of Australians' internet spending goes to the online channel of 'traditional' retailers (as opposed to online-only stores)," Roy Morgan CEO Michele Levine notes in its analysis. "Considering that traditional retailers' share of the online market was close to zero in 2010, this shows the progress they've made." That's good news for Australian bricks-and-mortar stores right now, but it also suggests that a big online brand could make an impact, and Amazon is pretty much as big as they come.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.

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